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Option pool calculator

The short answer

A pool created in the pre-money is paid for by the people who already own the company. This works out what the ask costs you in points and in dollars, and what your hiring plan actually needs.
  • The same round modelled with the pool and without it
  • The cost in percentage points and at the round's own valuation
  • A hiring plan you can put in front of the investor
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Your round

Change the ask and the hiring plan, and watch what each one costs.

Today and the round

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The hiring plan

What the pool is actually for. This is the argument that wins.

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Where the shares come from

The ask. An investor asks for a pool that is a percentage of the company available after closing, typically 10% to 20%. It sounds like a housekeeping item.

The mechanism. Those shares are created in the pre-money, before the new money is counted. That means the pre-money valuation you agreed is divided over more shares, the price per share falls, and the existing holders absorb the whole increase.

The effect. A ten-point pool on a typical seed costs the existing holders several points of ownership, permanently. It is usually the second largest line of dilution in the round after the money itself.

An option pool in the pre-money is not a cost of the round. It is a cost of the founders.

How to argue it down

Not by refusing. By costing it.

Bring a hiring plan

Roles, counts and a percentage each, for the next 12 to 18 months. A pool sized from a plan is hard to argue with; a pool sized from a round number is hard to defend.

Count what is unallocated

The pool you already have counts toward the percentage the investor wants available. Total it before agreeing to a top-up.

Shorten the horizon

A pool for 12 months of hiring, topped up at the next round, costs less today than one for 24 months at today's price.

Ask for it in the post-money

Rare, but worth asking: a pool created in the post-money is shared with the new investor rather than paid entirely by you.

Option pool questions

Who pays for the option pool in a round?+

If the pool is created in the pre-money, which is the standard ask, the existing holders pay for all of it and the new investor pays for none. The pool shares are issued before the money arrives, so they dilute everyone already on the cap table.

How big should an option pool be?+

Big enough for the hires you can name in the next 12 to 18 months, and no bigger. Build it from roles and percentages: three senior engineers at 0.4%, a head of sales at 1%, and so on. A number argued from a plan is the only argument that moves an investor.

Can I negotiate the pool?+

Yes, on three axes: the size, whether it sits in the pre-money or the post-money, and the period it covers. A pool sized for 12 months that you top up at the next round costs you less today than one sized for 24.

Does the unissued pool I already have count?+

Yes. Investors ask for a percentage available after closing, so anything already unallocated counts toward it. Many companies ask for a top-up they do not need because nobody totalled what was already there.

Keep reading

Model it against your real cap table

Inside Capable the same model reads your actual securities, so the pool, the SAFEs and the round are one calculation. 14-day free trial, no card.

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